Bitwise CIO: Washington’s Shift Is Crypto’s Rare Alpha Opportunity

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In finance, alpha represents the holy grail—the ability of an investment strategy to outperform the market. True alpha is exceptionally rare. To achieve it, you need insight that the broader market lacks. That kind of edge is hard to come by.

Markets are fiercely competitive. You're up against hedge funds, institutional giants, and high-frequency trading firms—all backed by decades of experience and billions in capital. No wonder most fail. According to S&P Global, nearly 90% of actively managed funds underperformed their benchmarks over the past decade.

I’m a firm believer in index investing. I help manage one of the world’s largest cryptocurrency index funds, and I even wrote the foreword to Eric Balchunas’ The Bogle Effect, a book about Jack Bogle, the pioneer of passive investing.

But every so often, a genuine alpha opportunity emerges—one so compelling it’s impossible to ignore. Right now, we’re standing at the edge of one of the most significant shifts in crypto history. And most people haven’t noticed.

The Sound of a Political Gunshot

Over the past month, Washington’s stance on cryptocurrency has undergone a seismic transformation.

For years, crypto policy in the U.S. has been deeply partisan. Republicans have generally championed innovation and deregulation, while many Democrats—led by figures like Senator Elizabeth Warren—have taken a hostile stance. In fact, Warren’s 2023 announcement of an “anti-crypto coalition” symbolized the resistance crypto faced within the Democratic party.

But the tide is turning.

Crypto advocates have spent years building political influence, including forming one of Washington’s top political action committees. Those efforts are now paying off.

On May 8, 2025, 21 House Democrats joined Republicans in voting to repeal SAB 121, a controversial SEC accounting rule that effectively barred large banks from offering crypto custody services. Just days later, 10 Senate Democrats—including Majority Leader Chuck Schumer—supported the repeal, marking the first time a bipartisan coalition advanced pro-crypto legislation in U.S. history.

Then came the real shock: On May 20, 71 Democrats voted alongside 208 Republicans in favor of FIT21, a comprehensive crypto regulatory framework that would transfer primary oversight of digital assets from the SEC to the more innovation-friendly Commodity Futures Trading Commission (CFTC).

Even more surprising? The SEC—led by Gary Gensler, a Democrat-appointed chair long criticized for his adversarial approach to crypto—approved spot Ethereum ETFs. This was something few analysts predicted just months ago.

👉 Discover how regulatory shifts could unlock massive crypto investment flows.

Let’s be clear: the fight isn’t over. President Biden recently vetoed the SAB 121 repeal. And FIT21 still faces an uphill battle in the Senate before the election cycle ends. Ethereum ETFs aren’t live yet either.

But none of this diminishes the momentum. After years of headwinds, the political winds are finally shifting in favor of crypto innovation.

Why This Is Real Alpha

This is alpha precisely because most investors aren’t paying attention.

I’ve spent the last few weeks traveling to major financial conferences, and I’ve tried to share this story with portfolio managers, advisors, and institutional allocators. Yet time and again, I’m met with blank stares.

The narrative feels too complex. The impact seems too distant. After all, regulations haven’t officially changed—yet.

But here’s what they’re missing: regulatory clarity is the single biggest barrier preventing mainstream adoption.

Consider this: financial advisors collectively oversee approximately $20 trillion in assets. For six consecutive years, we’ve surveyed these professionals to understand what holds them back from allocating to crypto. For five of those years, the answer has been consistent—regulatory uncertainty.

In our latest survey, 64% of advisors cited unclear regulations as their top concern.

Now imagine what happens when that barrier starts to dissolve.

👉 See how financial professionals are preparing for a post-regulation crypto market.

The Wall Street Domino Effect

Wall Street operates on risk frameworks. Major institutions won’t move until they have legal and regulatory cover.

Over the past two years, banks like BNY Mellon, Nasdaq, and State Street announced plans to launch crypto custody services—only to pause or scale back due to fear of SEC enforcement under SAB 121.

But with bipartisan momentum growing and key regulations under threat of repeal, those same institutions may soon re-enter with full force.

Think about BlackRock’s entry into crypto via its Bitcoin ETF. That single move injected billions into the ecosystem and shifted market sentiment overnight.

Now, imagine not just one asset manager—but the entire financial system—treating crypto as a legitimate asset class. Banks offering custody, advisors recommending allocations, pension funds exploring exposure.

That’s not speculation. That’s an inevitable cascade—one triggered by policy change.

When institutional capital realizes that Washington is no longer an obstacle but a potential enabler, we’ll see a wave of investment unlike anything in crypto’s history.

A New Era of Institutional Adoption

We’re not just watching a political shift—we’re witnessing the foundation of crypto’s institutional era.

The core keywords defining this moment are clear:

These aren’t just buzzwords—they’re catalysts. And they’re converging at the same time.

As these policies advance, we’ll likely see:

And retail investors? They’ll follow institutional money—as they always do.

👉 Learn how early movers are positioning for the next phase of crypto growth.

Frequently Asked Questions (FAQ)

Q: What is SAB 121, and why does it matter?
A: SAB 121 is an SEC staff accounting bulletin that requires banks offering crypto custody to record liabilities equal to the value of assets held. This creates massive balance sheet risk, discouraging traditional financial institutions from entering the space. Repealing it would open the door for widespread banking participation in crypto.

Q: How could FIT21 change crypto regulation in the U.S.?
A: FIT21 would establish clearer rules for digital assets and shift primary regulatory authority from the SEC to the CFTC—a commission historically more supportive of financial innovation. This could foster a more predictable environment for startups and investors alike.

Q: Why did the SEC approve Ethereum ETFs despite past resistance?
A: The approval signals a strategic shift—possibly influenced by court rulings, political pressure, and the success of Bitcoin ETFs. It suggests that even skeptical regulators may now recognize the inevitability of spot crypto ETFs.

Q: Will Biden’s veto stop all progress?
A: Not necessarily. While the SAB 121 repeal was vetoed, the bipartisan support behind it shows growing momentum. Congress may revisit the issue or pursue alternative legislative paths to achieve similar outcomes.

Q: How soon could institutional capital flow into crypto?
A: If Ethereum ETFs launch and key legislation progresses, we could see significant inflows by late 2025 or early 2026. The pace will depend on final regulatory clarity and product availability.

Q: Is this opportunity only for U.S.-based investors?
A: No. While U.S. policy sets global precedent, regulatory shifts in America often influence international markets. Clearer U.S. rules could accelerate adoption worldwide.

The alpha isn’t in betting on price swings—it’s in recognizing that the game itself is changing. The convergence of political will, regulatory evolution, and institutional readiness is creating a rare window of opportunity.

Those who understand this shift today will be positioned to benefit when the floodgates open tomorrow.